Manx Banking

By PILCHER G. RALFE.

The following article, dealing with the general history of
Banking in the Isle of Man, and re-printed, by permission, from
The Scottish Bankers Magazine, April 1917, should prove of
interest to readers of this booklet. Such small additions and
corrections as are necessary are included in the footnotes.

MANX Banking began more than a century ago1. On 25th
August 1793 The Manks Mercury, the Island's earliest
newspaper, remarks, "It is confidently reported that some gentlemen
of considerable rank and property have it in contemplation to erect a
Bank here, which certainly would be of infinite advantage to the
public at large." It appears, however, to have been in May
18022 that the earliest Bank commenced business, that of
Messrs. M.H. & G. Quayle, J. Taubman, and J. Kelly. Its office
was at Castletown, then the capital of the Island, and the large
town house of the Quayles of
Crogga, still existing, is said to have been built for its
accommodation. This concern was called "the Isle of Man Bank," and
carried on business until 1818, the partners being several times
changed.3

A curious feature of Manx life at this time was the profusion of
notes and cards in circulation, issued by tradesmen for various small
amounts.4 In, 1816 a newspaper described the inconvenience
of this currency as such as to "threaten the Island with general
ruin." In 1817, the Legislature, in order to abate the uncertainty of
this varied and often worthless currency, passed an Act regulating by
licence (to cost £20) the issue of notes.

Five Bank licences were at once granted under this law, to J.
Spittall & Co.,5 Edward Forbes,., H. & J. Holmes,
L. M'Whannell,6 and Edward Gawne,7 with an
authorised issue amounting to £33,400.8 These notes
were for 20s., 21s., and various smaller sums, down to 1s. The Isle
of Man Bank issued also penny and halfpenny copper tokens with the
familiar device of the three legs.

The Banking firm of Wulff & Forbes,9 established in
1826, was in 1836 taken over by the Isle of Man joint Stock Banking
Company, which had a capital of £50,000 in £5
shares.10 This undertaking ended disastrously in 1843. The
cause was an extensive defalcation by a manager, whose method was the
circulation of fraudulent bills. A bitter controversy on the
management and the method of liquidation is reflected in the
newspapers of the time. At the failure, the Bank was liable on notes
£14,000 ; unpaid drafts, £6000 ; and deposits,
£45,000. Its advances were £62,000, and securities lodged
against notes £15,000.

Its greatest indebtedness seems to have been to its London agents,
some £70,000 to £80,000. I gather these details from the
papers above mentioned, where it is stated that a call of £10
per share on six thousand shares held by solvent shareholders would
be sufficient to liquidate the Bank, but what these unfortunate
persons eventually had to pay I have not been able to discover.

Holmes' Bank above referred to (called also Douglas and Isle of
Man Bank) opened in 1815 and closed in 1853, on the death of the last
surviving partner11. The Holmes' were fish-curers, which
business they carried on at Derbyhaven. They were also shipowners and
merchants in many other branches, and owned extensive property in the
Island and in England. Their banking business was, for the time,
very, considerable. Seeing that the sole owner and manager was at the
close a blind man of seventy-five, it does not seem surprising that a
long and difficult liquidation followed his death, but it does appear
astonishing that the Bank deposits then reached, it is said,
£200,000.

A remarkable feature of this case was the discovery that notes
largely exceeding the licence had come surreptitiously into
circulation. Through such experiences, here as elsewhere, has the
present severely regulated, inspected, and audited banking system
been evolved.

In 1836 (the same year as the Joint-Stock Bank) another company,
The Isle of Man and Liverpool Banking Co., commenced business at
Douglas. It wound up in 1838, "from want of sufficient capital to
carry on business in both places." 'the Isle of Man and Liverpool
Bank was succeeded by yet another company, The Isle of Man Commercial
Bank, which about 1849 merged in the City of Glasgow Bank, carrying
on its insular business as the Bank of Mona. 'This was the first
entrance of a large Bank on modern lines, and although the City of
Glasgow Bank was an unfortunate example of a Scottish institution
insular banking undoubtedly owes to its initiative much of the
superior system, energy, and stability of the later financial
concerns, whose methods have shown a distinctly Scottish,
rather than English, character. Although its business was narrowed by
the establishment of strong native Banks, it continued to the end to
be the Bank of the Manx Government, and of many of the official and
proprietary class. The story of its fall in 1878 is familiar to
Scottish readers. The insular branch was honorably and efficiently
managed, and the Isle of Man, as it had no share in the causes of its
downfall, suffered only some slight temporary inconvenience from its
stoppage, as there were no shareholders resident, and the depositors
were soon paid in full.

The office of the Bank of Mona was in the handsome
building on Prospect Hill, Douglas, now with additions used by
the Manx Government and Legislature. It was the first Bank to carry
on business in all the three other towns of the
Island12.

For nearly twenty years after the closing of the Bank of Mona,
Manx banking was carried on entirely by three local companies.
Several Companies' Acts had in the meantime been passed, that of 1865
admitting the principle of limited liability.13 They are
summed up in the Companies (Consolidated) Act, 1 George V.1910. This
period witnessed an extraordinary development of banking business in
the Island, the ever-increasing deposits marking the growing wealth
of the people, and their confidence in these peculiarly national
institutions.14

The private Bank of Dumbell, Son, & Howard, established in
1853, when Holmes' closed, became in 1874 Dumbell's Banking Co.,
Ltd., with a paid-up capital of £50,000. Its founder, George
William Dumbell, a lawyer, was long a conspicuous figure in insular
finance and politics, and died at an advanced age in 1887. After 1880
this Bank, leaving the path of legitimate banking, entered upon a
career of adventure, initiating and financing speculative companies
and combines, whose growth was encouraged by the remarkable
development of the Island, and especially of Douglas, as a holiday
resort. Thus associated with the newer and more risky features of
Manx life, but managed with characteristic energy, it built up a very
large business, and its deposits were finally quoted as
£1,300,000.15 Although it had the custom of many Manx
mercantile companies, of large Douglas tradesmen, and (under
security) of the insular government, it can hardly be said that, even
at the height of its popularity, it obtained that confidence which
should be enjoyed by, a first-class financial institution. Yet to all
but a few the news of its stoppage
on 3rd February 1900 was an utter surprise.

It is still, perhaps, too early, for a Manxman to write freely on
the details of the calamity. The evils which destroyed the Bank may
be summed up under two heads: its encouragement, as above indicated,
of speculative adventure; and the practical control of its resources
by one or two men, unchecked by efficient and independent audit. At
the end its liquid assets had almost completely disappeared, and its
own notes, included as cash in hand, somewhat concealed the
inadequacy, of the latter amount.

The ruin of the Bank was followed by that of many concerns which
for years had existed only on its credit ; yet the worst
anticipations of the time were far from being realised. What was
healthy in Manx trade rapidly recovered from the shock, and by
careful management the assets of the Bank have already realised
sufficient to pay dividends of 12s. 1d. in the
£16.

A month after the failure, the uneasiness of the public mind
culminated in a run on the surviving local Banks. Though of short
duration and easily met, it tended to increase the tension, and was
peculiarly unwelcome, as it came at a time when the price of the
High-class securities, with which the Banks must part to meet the
demand, was unusually low. A more permanent effect of the crisis was
the replacement of Bank deposits by investments on the part of many
of the Manx public, especially as a large amount of various kinds of
property was within the next few years thrown upon the market through
Dumbell's liquidation.

The goodwill of Dumbell's business was purchased by Parr's Bank,
Ltd., which has a district manager at Douglas, and branches at
Ramsey, Castletown, Peel, Port S. Mary, and Laxey .

Immediately upon the principle of limited liability being in 1865
recognised by Manx Act, the Isle of Man Banking Co., Ltd., was
registered. It has ever since been familiarly known as "The Limited,"
though for thirty years all Banks on the Island have been
limited.

With its influential body of shareholders, its success was from
the first issued, and the directorate has from time to time been
served by men of the highest position in the Island. The subscribed
capital is £150,000 of which £30,000 has been paid. The
Bank has three offices in Douglas, with branches at Castletown, Peel,
Ramsey, Port S. Mary, and Laxey, and a sub-branch at Port Erin.

Though apparently for a time distanced by the enterprise of
Dumbell's Bank, its greater restraint in the dangerous time of
inflation enabled it to outlive its rival, retain the public
confidence, and receive an accession of business which has in fact
made it the predominant financial concern of the Isle of Man. In 1899
its deposits stood at £1,056,000; by 1906 they had fallen to
£790,000, for from the accumulations in the hands of this Bank a
very large proportion of the sum required in the liquidation of
Dumbell's had to be drawn. The deposits have now again risen to
£856,000,

In 1882 the Manx Bank, Ltd., commenced business with a paid-up
capital of £25,000. This Bank was perhaps started too late, when
the other two local institutions had already everywhere established
their connections. Nevertheless, having a well -distributed body of
shareholders, it became popular, especially amongst country people
and tradesmen, to a considerable)e extent justifying its name as
pre-eminently a native Bank. In 1900 it was taken over on favourable
terms by the Mercantile Bank of Lancashire (now amalgamated with the
Lancashire and Yorkshire Bank).

This Bank's deposits at the time of its extinction had risen to
£200,000. Its branches were at the four towns and Port Erin, to
which the Lancashire and Yorkshire Bank has added Onchan in the
suburbs of Douglas.

In 1897 the Liverpool Union Bank opened an office at Douglas being
the first English Bank to invade the Island. It was soon afterwards
(in 1900) acquired by Lloyd's Bank, and the Island was thus
introduced to the largest of the immense combinations of modern
times. Branches have since been opened at Ramsey and Peel.

In 1900, when last it was possible to sum up nearly the entire
Banking figures of the Island, deposits stood at two and a-half
millions,17 and advances at one and a-half millions. Three
of the Banks now merge their figures in English balance-sheets, but
considering the large sums of deposited money locked up in the
liquidation of Dumbell's Bank, the popularisation of investments,
especially of municipal loans, and the lowering of interest rates, it
can hardly be that the present amount approaches that of 1900.

The Banks in the Isle of Man are closely connected with the daily
life of all classes of its inhabitants. Their twenty-four offices
employ about eighty officials. The English Institute of Bankers
has many members in the Isle of Man, and its examinations are
held annually in all the towns. Banking facilities are given to the
public with a fulness and care which perhaps can hardly be excelled
even in the much-banked land whose mountains look over to our own
across the twenty miles of sea. It is rarely that a farmer or a
tradesman, however small his holding or his business, is without a
Bank account, and the use of the unstamped cheques has become
universal, no doubt seriously reducing the note
issue18.

Although only one Bank still retains its native proprietary, the
English Banks utilise in general the services of officials trained on
the Island, and for the present at least there is, superficially
viewed, little difference to be observed in their methods of dealing
with Manx Customers. All except Lloyd's issue £l
notes.19 The Isle of Man Bank has also £5 notes. (The
Bank of Mona is the only other Manx Bank which has ever issued a
£5 note.) Manx notes are as well secured as any in the world,
full approved security for the issue being lodged with the insular
Government, and vested in the names of its nominees.20

Bank Holidays, according to the latest Act (1910), are New Year's
Day, Good Friday, Easter Monday, Whit Monday, 5th July (Tynwald Day,
the specially Manx festival), first Monday in August, 9th
November,21 and 25th and 26th December. Bills due either
on Sundays or holidays are payable next day. The weekly half holiday,
established about twenty-five years, is Thursday.

Limited Banks registered under Manx law must twice a year publish
lists of their shareholders, and must exhibit lists of transfers in
two places in each of their offices. Abstract statements of
liabilities and assets must also be exhibited as in England.
Two-thirds of the nominal capital of a limited Bank must remain as
reserve liability in case of winding-up.

Trade bills are naturally rare in a community with so little
industrial life. Joint and several promissory notes, usually for the
accommodation of one party,were abundant in early years, but are now
little encouraged. From a public point of view their disappearance is
not to be regretted. At sales of stock, which usually take place in
November, before the date of quitting farms, two months' credit is
often given to buyers on promissory notes. This paper, which has
generally two names, is left with a Bank for collection and credit,
and forms in ease of need an excellent security.

By a law enacted in 1649, and confirmed in 1687, the highest rate
of interest permitted on mortgages was 10 per cent. In 1691 a further
Act reduced this rate on all future contracts to a maximum of 6 per
cent, all contracts exceeding this rate to be void, and any one
offending to forfeit three times the value of the things bargained
!

This severe but salutary, law is still in force. Consequently 6
per cent is the limit of a Bank's interest, irrespective) of what
"Bank Rate" may rise to : 6 per cent is also "legal interest" in the
Island.

By arrangement among the Banks, uniform rates of 2 per cent and
2½ per cent are allowed on current accounts and deposits
respectively. Thirty-five years ago the Bank of Mona was allowing as
high as 4 per cent on deposit, and a little earlier Holmes' Bank
4½ per cent. For many years deposit interest stood at 3 per cent
with all the existing local Banks, and Dumbell's allowed the same
rate on current account until its failure. Commission on current
accounts other than overdrawn is of comparatively recent
introduction.

In the Isle of Man, as in Scotland, the old time Bank agent was
frequently his customer's financial factotum. The shrewd and somewhat
suspicious Manxman still reposes in him a touching confidence, and
the association, perhaps lifelong, involves no small amount of mutual
regard and affection. Much might be said about the humours of Manx
Banking, of the types of customers and transactions ; but the Manxman
is not tolerant towards discussion of his peculiarities, nor perhaps
would even the most generous of editors afford me space for such
details !

That new local Banking concerns will in future be formed seems
very unlikely, nor does it appear probable that there is room for the
further division of the narrow profit by the establishment of more
branches from the mainland. The principle of the Island's local
currency and financial isolation seems firmly fixed and justified by
experience. On the whole, we need not expect in the near future much
change in Manx Banking, but we may confidently look to the existing
concerns, by their existing methods. to continue to fulfil a very
important and useful function in our little community.

Footnotes

1" Much information about early Banks is borrowed
from Clay's 'Currency of the Isle of Man,' Manx
Soc, Vol. 17.

2, 1 have seen an unsigned and unnumbered £5
note, dated 1st January 1788, which bears the name of "Taubman and
Kennedys Isle of Man Bank." I cannot learn that this Bank ever
carried on business.

3. An Isle of Man Insurance Company was for a time
carried on in connection with this early Bank. Another was founded in
the eighties, and after a period of considerable success, sold its
business to an English office.

4. Forgeries, even of Bank of England notes, were
also abundant, and counterfeit copper money was plentiful, In 1812
Thomas Young, convicted of passing forged notes to the value of 5s.,
was sentenced to six months' imprisonment and a hundred lashes at
Ramsey Cross.

5. Seems to have closed about 1819.

6. At Ramsey. Open as early as 1810. Closed
perhaps about 1829.

7.1816 to 1837. Mr. Gawne was a brewer and
landowner, and carried on his business at Mount Gawne (near Port S.
Mary), of which place his note bears a view.

10. It had 146 shareholders, and gave a bonus of
£2,500 for the transfer of the business.

11. The original partners were Henry,John, &
James Holmes.

12 The growth
of the town population at the expense of
that of the country has been very marked during the past sixty years.
Especially noticeable is the increase of Douglas, which with its
suburbs holds nearly half the insular population. and is largely an
English town. The three other towns are Ramsey, Peel, and Castletown,
Port Erin, Port S. Mary- and Onchan may now almost claim that rank,
also Laxey, though the last-named picturesque, locality is rather a
collection of hainicts. All these have now separate municipal
goverment.
The Manx Bank was the first Bank at Port Erin, the Isle of Man Bank
at Port St. Mary , Dumbell's Bank at Laxey, and the Lancashire and
Yorkshire Bank at Onchan.

13 Some fifty years ago Mining companies
especially were formed in great numbers most of them hopeless
failures. Deserted mine buildings, with their high stacks and ruined
sheds, are a very, frequent feature in the Manx landscape.

15. It was, however, proved after the failure that
this figure must be materially reduced by the amount of large
borrowings treated as deposits from other Banks.

16. A final dividend of 6d in the £ was paid,
1922, making a total of 12/7

17. Without the, amount of the Liverpool Union
Bank's deposits, which is not separately obtainable. but which, as
the Bank had but recently commenced business. can hardly have been
large. The sum equalled about £50 per head of the population. In
Scotland at the same time the proportion was about
£25.

18. The total amount of the Manx note issue was in
1900 over £50,000; in 1913 £36 000. (1926 about
£130,000)

19. Lloyds, and the recently established Barclay's
Bank, now also issue £1 notes.

20 A peculiar feature about Manx notes is that
they are payable at all the branches of the Bank.

21 Probably our legislature meant the birthday of
the reigning sovereign, but 9th November was enacted, and it was
still kept in 1912.(since altered to 3rd June).